NEW DELHI: Ahead of assembly elections in Maharashtra, the government on Monday announced a series of measures for the sugar industry, including an increase in the import duty from 15 per cent to 40 per cent, to improve its financial health but may end up pushing up the price of the sweetened by Rs 2-3 a kg for consumers.

The package — on which work started as soon as the BJP government was formed at the Centre — also includes a loan package of around Rs 4,400 crore, doubling the ethanol blending level in petrol to 10 per cent and extension of export subsidies till September, even at the risk of attracting penal action at the World Trade Organization.

Already, the industry gets zero-interest loan from banks and other sops.

Food minister Ram Vilas Paswan told reporters that the benefits will be available to only those mills which "guarantee" that they will clear the arrears of cane farmers. But most of the benefits can be limited to a particular set of producers.

Clearly, the focus is on Maharashtra, which goes to polls in three months and some of the powerful ministers such as road transport minister Nitin Gadkari attended the meeting where the package was cleared. This is also being seen as a move by Narendra Modi government to keep its commitment to cane growers in western Uttar Pradesh during the last Lok Sabha polls.

The government's pre-poll sop for Maharashtra will come at a cost to the consumers, amid pressure on food prices in the wake of weak monsoons. Higher import duty on sugar will make it completely unviable to bring consignments of the sweetener into the country, making it possible for the industry to raise prices in the domestic market from the current level of around Rs 39 a kg.

After the meeting Paswan said the government will continue the subsidy of Rs 3,300 per tonne for raw sugar export till September 2014. He added that the government will also extend the duration of repayments of interest free loans made to mills against excise duty to five years from three years.

"All these decisions were unanimous...If the industry gives in writing today, we will put into execution whatever we have announced today. It all depends on the industry now by when can they pay the farmers, they will receive the aid accordingly," Paswan said.

Paswan said the issues that can be decided by individual ministries would be done soon. "Issues that need to be taken to the Cabinet, will also be done," he added.

Paswan said that sugar mills will get an additional interest free loan of Rs 4,400 crore, but mill owners must repay farmers their dues worth Rs 11,000 crore. The proposed relief to sugar mills will be implemented once the owners give guarantee to repay farmers, Paswan said.

It was attended by the cabinet secretary and ministers from the two major sugar producing states, Uttar Pradesh and Maharashtra.